Highlight on Rhode Island: Some see red over premium tax

Like all state Health Insurance Exchanges, Rhode Island’s HealthSourceRI needs to become self-sustaining because federal support is ending. Newly elected Governor Gina Raimundo (D) has proposed a tax on all health insurance premiums. Individual premiums would be taxed at 3.6 percent, while the rate for small businesses would be 1 percent. The governor estimates that the tax would raise $11.2 million per year, which, she says, is enough to fund the operation of the Exchange.

Individuals who receive advance premium tax credits, that is, those who buy coverage through the Exchange and have incomes below 400 percent of the federal poverty level, would not be required to pay the tax.

Cost of operating the Exchange

Some state lawmakers want to turn the state’s Exchange over to the federal government because they believe it is too expensive to operate. The budget for the current year was $52 million, which included $24 million for Deloitte for continuing development of the computer system and $10 million to Optum to continue development of the call center by two contractors. Rhode Island received more than $150 million in grants from CMS to plan and establish the Exchange between 2011 and 2014.

HealthSource RI Director Anya Rader Wallack, who recently replaced Christine Ferguson as director, projects that the cost to run the Exchange during state fiscal year 2016 will be $30.6 million, of which $6.2 million will have to come from state funds.

Enrollment

About 31,500 people enrolled in private coverage through the Exchange for 2015. Of those, 10,300 are new enrollees, and the rest were covered by an Exchange plan in 2014. For 2015, enrollees could choose from three insurers, up from two in 2014, and 40 plans, up from 28 in 2014.

Most Exchanges provide for automatic renewal of Exchange policies. In other words, the consumer did not need to return to the Exchange unless she wanted to shop around again. However, Rhode Island’s former director, Christine Ferguson, set up HealthSource to require enrollees to return every year so that they would choose the best plan for them for that year. According to the New York Times, observers of the Medicare Advantage market have seen that plans that were among the lowest cost in one year often raise their prices significantly the second year, so that enrollees who don’t look around again may lose substantial savings.

About 78 percent of last year’s enrollees returned to the site to choose a plan. And the cost of the 2015 benchmark silver plan dropped 10 percent from the year before.  Many of them found that they would save money by choosing another plan at the same metal level.  At the same time, the 22 percent that did not re-enroll would have lost their coverage, at least temporarily, unless they have found coverage outside the Exchange.